Tuesday, February 13, 2018

On February 8, 2018,
the U.S. Chamber of Commerce’s Global Innovation Policy Center (GIPC) released
the sixth edition of the International IP Index entitled “Create.” The Index
scored the intellectual property (IP) systems of 50 countries, representing
over 90% of the world’s gross domestic product. Scores were derived from several
specific factors pertinent to IP rights protection, allowing policymakers to
better understand where their countries stand in relation to others.

The
International IP Index should prompt U.S. policymakers to strengthen our IP
rights system. Although the U.S. ranked at the top of the Index, by a smidgen, the
Index nonetheless identified IP rights enforcement as one of the areas in which
improvements need to be made. Lackluster Index scores for IP rights systems in
certain foreign countries should also spur U.S. trade negotiators to seek
stronger protections for Americans’ IP rights overseas. By bolstering IP
protections, the U.S. will further benefit from the strong relationship between
strong IP rights and economic activity.

Scores in the 2018
International IP Index are based on eight key categories, including: patent
rights, copyrights, trademarks, trade secrets, commercialization of IP assets,
enforcement, systemic efficiency, and membership in and ratification of international
treaties. Those categories encompass 40 separate indicators of a strong IP
system.

Because scoring
for this year’s Index is based on 40 indicators, instead of 35, a
weighted-score was calculated to determine whether countries’ protections of IP
rights were stronger or weaker than what was calculated in last year’s Index.
Of the 45 countries included in the 2017 Index, 28 improved their weighted-scores
in this year’s Index.

For the sixth
consecutive year, the United States had the highest score. The U.S. IP system
rated 37.98 (out of 40). The United Kingdom and Sweden followed with scores of 37.97
and 37.03, respectively. The countries with the lowest scores were Egypt, Algeria,
and Venezuela at 10.10, 9.53, and 6.85, respectively.

Despite the United
States’ leadership with regard to strong IP rights protections, there are some
areas of weakness discussed in the Index. For example, the United States has a
perfect score with regard to encouraging creativity by virtue of strong
copyright protections, but it lacks an effective enforcement regime to disable
access to websites which facilitate pirated content and counterfeit goods. A 2017 report by the IP
Commission found that the annual cost of counterfeit goods, pirated software,
and theft of trade secrets to the U.S. economy is between $225 billion and $600
billion.

To combat online
piracy, Congress can help step up enforcement by reforming and updating the
Digital Millennium Copyright Act’s notice and
takedown system
under Section 512. Also, modernizing the U.S. Copyright Office by updating the administrative technologies in order
to maintain a readily searchable database of copyright registrations would be
helpful. So too would be giving the Copyright Office the authority to address
Section 512 matters. A process for adjudicating small claims for infringement would
bolster IP protections and enhance the economic value of copyrighted works. The
Register of
Copyright Selection and Accountability Act of 2017, which would
address some of these issues, passed the House of
Representatives in April 2017, but it has not made much progress in the Senate.
(See FSF Senior Fellow Seth Cooper’s February 2017 blog discussing the
need to modernize the Copyright Office.)

Moreover, the
relative lack of IP rights protections in several other countries, as reflected
in the Index, reinforces the need for U.S. pursuit of agreements to better
secure protections for IP rights holders internationally. The 2018 Index notes
that the United States’ withdrawal from the Trans-Pacific Partnership (TPP)
negatively affected the scores of member countries. (See our blogs about the
importance of multilateral trade agreements and TPP here, here, and here.)

The U.S. should
continue to seek new bilateral or multilateral agreements, including ones more
narrowly focused on strengthening protections for all IP rights holders in the
U.S. and foreign countries. As more countries adopt strong protections of IP
rights through trade agreements, the entire global economy also will grow
substantially, because legal institutions, including regimes that safeguard IP
rights, constitute a positive externality for the global economy. The mutual gains
from global trade are much higher when more nations adopt and enforce laws that
protect IP rights.

Importantly, the supplemental
statistical analysis
of the Index emphasizes that “the stronger the IP environment is, the stronger
an economy performs.” It also states that “even economies that implement
moderate improvements to their IP environment experience positive economic and
societal outcomes ranging from access to financing and foreign direct investment
to higher levels of economic value generation.”

Across all
countries, the Index found several noteworthy correlations between strong IP protections
and economic innovation and creativity. On average, countries that scored above
the median of the Index:

Are 20% more
productive and 60% more likely to have robust entrepreneurial activity,

Produce up to 80%
more knowledge and technology outputs,

Have twice the percentage of high-value workforce and over
six times more highly skilled researchers in its labor force,

Are 62% more
likely to have larger and more dynamic content and media sectors,

Provide up to three times
wider access to new music through legitimate and secure platforms,

And generate twice as
many video-on-demand and streaming services.

Strong protections
of IP rights incentivize investment in research and development, innovation,
and creative content because they ensure entrepreneurs have an opportunity to
earn a return on their labors. And as economies with strong IP rights regimes
grow and prosper, consumers are the ultimate beneficiaries as new goods and
services, in whatever form they take, are brought to market.

The International
IP Index provides U.S. and foreign policymakers a useful tool for assessing how
to improve IP systems and enhance innovation and creativity in the 21st Century
economy.